Drawdown measures how far an asset or portfolio has fallen from its peak, expressed as a percentage. Recording the worst such fall over a period is maximum drawdown. Bitcoin's largest was 93.8% during 2011, when the price dropped from $31.91 to $1.99, and each subsequent cycle has produced a shallower one.
How it is calculated
Take peak minus trough, divided by peak.
Reaching $100 and falling to $60 gives a 40% drawdown. Recovering to $120 and falling to $90 gives 25% from the new peak. Always the measure references the highest point reached, not the starting price.
Maximum drawdown is the largest peak-to-trough decline across the whole period measured. Among risk statistics it is the most useful one most people never look at, because it answers a question total return does not: how bad did this get along the way?
The asymmetry that catches people out
Recovering from a drawdown takes a larger percentage gain than the fall.
| Drawdown | Gain required to recover |
|---|---|
| 10% | 11% |
| 25% | 33% |
| 50% | 100% |
| 75% | 300% |
| 90% | 900% |
| 95% | 1,900% |
As the drawdown deepens, the gap widens sharply. Hence why "down 80% from the all-time high" understates the situation. Getting back takes a 400% gain, a completely different proposition from recovering 80%.
Bitcoin's drawdown history
| Period | Peak to trough | Drawdown |
|---|---|---|
| 2011 | $31.91 to $1.99 | 93.8% |
| 2013 to 2015 | $1,163 to $152 | 86% |
| 2018 | $19,783 to $3,122 | 84% |
| 2022 | $68,789 to $15,476 | 77.5% |
Two patterns hold across all four. Every decline exceeded 77%, and each was shallower than the one before. To reach a bottom took roughly a year, with the 2018 cycle running about fourteen months.
Following Bitcoin's record high of $126,296 on 6 October 2025, the subsequent decline was still unresolved as of August 2026. By the standard of the four completed cycles, it was shallow. Whether it stays that way is not a question history answers.
Drawdown vs volatility
Related, and measuring different things.
Volatility measures how much prices move, in both directions, usually as annualised standard deviation. Drawdown measures how far they fell from a peak, in one direction only.
Recovering quickly, an asset can be highly volatile with modest drawdowns. Declining steadily rather than violently, it can show low measured volatility alongside a catastrophic drawdown.
For anyone deciding whether they could actually hold a position, drawdown is the more honest number. Volatility describes the ride. Drawdown describes the worst moment of it.
Why it matters more than total return
A strategy returning 200% with a 90% maximum drawdown along the way and one returning 150% with a 30% maximum drawdown are not comparable investments, despite the first looking better on the headline.
Behavioural rather than mathematical is the reason. Almost nobody holds through a 90% decline. That return only exists for someone who did, and they are far fewer than the people who owned the asset at the peak.
Here sits the specific gap between a backtest and a real outcome. It applies directly to leaderboards and to any performance figure presented without a drawdown alongside it, which is why DYOR means checking both.
What drawdown does not tell you
- Nothing about recovery. Many assets set a maximum drawdown they never recover from.
- Nothing about duration. A 50% drawdown lasting two months and one lasting three years show the same number.
- Nothing about cause. A market-wide decline and a project failure look identical as a percentage.
- Nothing about your position. Drawdown measures the asset from its peak, not from your entry.
That last point matters. Buying after a 40% decline produces a very different drawdown from buying at the top, even holding the same asset.
Where mb.io fits
Drawdowns are a property of the asset. Where you hold it through one is a decision you control.
mb.io is a regulated crypto spot exchange backed by MultiBank Group, a financial institution founded in 2005 that serves more than 2 million clients across 100+ countries.
- Regulated by VARA in the UAE and AUSTRAC in Australia
- 10/10 security score from Hacken, an independent blockchain security auditor
- Institutional-grade MPC custody powered by Fireblocks, with segregated client funds
- Buy, sell, and swap in three steps, from sign-up to purchase
- 24/7 multilingual client support
Open your account and start trading on mb.io.
Frequently asked questions
How is drawdown calculated?
Peak minus trough, divided by peak, expressed as a percentage. An asset falling from $100 to $60 has a 40% drawdown, measured from the highest point reached rather than from your entry.
What is maximum drawdown?
The largest peak-to-trough decline over a given period. Bitcoin's was 93.8% in 2011, falling from $31.91 to $1.99, which remains its worst on record.
Why does recovering from a drawdown take a bigger gain?
Because the gain is calculated from a smaller base. A 50% fall halves the value, so returning to the original level requires doubling it, which is a 100% gain.
What has Bitcoin's worst drawdown been?
93.8% during 2011. Each subsequent cycle has been shallower: 86% in 2013, 84% in 2018, and 77.5% in 2022.
Is drawdown the same as volatility?
No. Volatility measures movement in both directions. Drawdown measures the fall from a peak in one direction, which makes it the better indicator of whether you could actually hold a position.
How long do crypto drawdowns last?
Bitcoin's completed cycles took roughly a year to reach a bottom, with the 2018 decline running about fourteen months. Recovering to a new record has historically taken considerably longer than the fall itself.
Why should I look at drawdown instead of returns?
Because returns assume you held throughout. A strategy showing 200% with a 90% drawdown along the way only delivered that to whoever sat through the 90%, which is a much smaller group than the headline suggests.
Does a large drawdown mean an asset is a bad investment?
Not by itself. Bitcoin has recovered from four drawdowns above 77%. Most individual tokens never recover from theirs, and the drawdown alone does not distinguish between the two cases.
